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Dow Soars 829 Points on Surprise Jobs Report

Dow Soars 829 Points on Surprise Jobs Report
(Joe Sohm/Dreamstime)

Friday, 05 June 2020 04:02 PM

Wall Street surged on Friday after a strikingly upbeat May jobs report unexpectedly provided the clearest evidence yet that the U.S. economy is headed for a quicker-than-anticipated recovery.

The Nasdaq breached its all-time closing high reached in February but pared its gains to end the session a hair's breadth below it. All three major U.S. stock indexes advanced 2% or more.

The S&P 500 and the Dow are now 5.7% and 8.3% below their respective closing records.

The benchmark S&P 500 is now 1.1% below its year-to-date break-even level.

The U.S. economy added a remarkable 2.5 million jobs last month, rebounding from April's record 20.7 million drop and pushing the unemployment rate down to 13.3%. Analysts saw unemployment soaring to a historic 19.8%.

"The numbers are a huge surprise to the upside," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"It would suggest a further confirmation the economy is coming back online," Arone added. "This is a strong signal that the effects are temporary and that the economy is improving."

"Long may it last."

U.S. Treasury yields rose on the jobs data, giving a boost to interest rate-sensitive banks and sending the S&P 500 Banks index up 4.9%.

Airlines, among the hardest hit by the coronavirus crisis, soared, with the ARCA Airlines index jumping 5.7%.

But the World Health Organization warned that the COVID-19 pandemic, which brought the global economy to its knees in the wake of mandated shutdowns, is far from over and new cases are on the rise.

Market participants now turn their focus to the U.S. Federal Reserve, which holds a monetary policy meeting next week where the latest jobs data will almost certainly be discussed.

The Dow Jones Industrial Average rose 829.16 points, or 3.15%, to 27,110.98, the S&P 500 gained 81.58 points, or 2.62%, to 3,193.93 and the Nasdaq Composite added 198.27 points, or 2.06%, to 9,814.08.

All 11 major sectors of the S&P 500 ended the session well in the black, with energy, financials and industrials leading the gainers in a continuation of a rotation into cyclicals, which were beaten up amid economic lockdowns.

Small caps and transportation stocks also outperformed, with the Russell 2000 and Dow Transportation up 3.8% and 3.1%, respectively.

Boeing Co surged 11.5%, giving biggest the blue-chip Dow its biggest boost, on hopes of a pickup in air travel a day after American Airlines Group Inc and United Airlines said they would boost their U.S. flight schedule next month.

Shares of luxury retailer Tiffany & Co jumped 6.5% after Reuters reported LVMH's $16.2-billion takeover deal was back on track.

Drugmaker Novavax Inc advanced 3.7% following its announcement that the U.S. Department of Defense would give it up to $60 million to manufacture its COVID-19 vaccine candidate.

Advancing issues outnumbered declining ones on the NYSE by a 5.03-to-1 ratio; on Nasdaq, a 3.08-to-1 ratio favored advancers.

The S&P 500 posted 26 new 52-week highs and no new lows; the Nasdaq Composite recorded 89 new highs and three new lows.

Volume on U.S. exchanges was 17.56 billion shares, compared with the 12.03 billion average over the last 20 trading days

GLOBAL STOCKS

An unexpected jump in U.S. employment sent world equities and oil surging on hopes that the global economy has started to recover from the coronavirus pandemic, pulling investors out of perceived safe havens like government bonds and gold.

U.S. nonfarm payrolls rose by 2.509 million jobs last month after a record plunge of 20.687 million in April. Economists polled by Reuters had forecast the unemployment rate jumping to 19.8% in May and payrolls falling by 8 million jobs.

"The numbers are a huge surprise to the upside," said Michael Arone, chief investment strategist at State Street Global Advisors. "It has confirmed what many folks were suggesting: that the effects on the labor market from the pandemic were temporary and that when the economy reopened and the infection rates started to diminish, that these jobs would come back."

MSCI's gauge of stocks across the globe gained 2.04%. The index is now down 4.5% for the year to date and trading at its highest level since early March, before the U.S. economy went into lockdown in an effort to slow the spread of the novel coronavirus.

Equity gains were widespread before the surprise jobs report. MSCI's broadest index of Asia-Pacific shares outside of Japan rose 0.9%, reversing early losses to stay near a 12-week high.

The index is up about 7.6% this week, on track for its best weekly showing since December 2011.

Emerging market stocks were up 0.7% and also on course for their best week since December 2011.

Hopes for a swift economic recovery sank U.S. government bonds, which had reached historic highs on fears that the pandemic would erode consumer demand. Benchmark 10-year notes last fell 20/32 in price to yield 0.8851%, from 0.82% late on Thursday.

"The sell-off in the bond market in the last few weeks seems to be justified," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. "This is a tremendously positive step in the right direction, and probably points to a faster recovery, at least in the jobs market, than people had expected."

Bond investors will get further insight into the likely direction of the economy when the U.S. Federal Reserve holds its regular two-day policy meeting next week.

Europe has now clawed back two-thirds of the losses incurred amid the coronavirus pandemic and Bank of America analysts said on Friday they expect European stocks to rise another 10% by the end of September on expectations of a pickup in business activity.

Set for a third straight week of gains, the euro rose to $1.1380, its highest level since March 10 and was on course for a weekly jump of 2.5%.

The dollar index made a tepid recovery, rising 0.08% to 96.84, but remained on track for its third consecutive week of losses and close to its lowest in nearly three months.

Hopes for an economic recovery sent oil prices surging. U.S. crude recently rose 4.97% to $39.27 per barrel and Brent was at $42.14, up 5.38% on the day.

© 2020 Thomson/Reuters. All rights reserved.


   
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Wall Street surged on Friday after a strikingly upbeat May jobs report unexpectedly provided the clearest evidence yet that the U.S. economy is headed for a quicker-than-anticipated recovery.
stock, market, wall street, dow, s&p 500, jobs
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2020-02-05
Friday, 05 June 2020 04:02 PM
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